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STANDING COMMITTEE ON EMPLOYMENT, WORKPLACE RELATIONS AND EDUCATION
08/06/2007
Workplace Relations (Restoring Family Work Balance) Amendment Bill 2007 Workplace Relations Amendment (A Stronger Safety Net) Bill 2007

CHAIR —Good morning, everyone. I declare open this public hearing of the inquiry into the Workplace Relations Amendment (A Stronger Safety Net) Bill 2007 and the Workplace Relations (Restoring Family Work Balance) Amendment Bill 2007.On 10 May 2007 the Senate referred the bills to the committee for inquiry. The committee is due to report on 14 June 2007. The committee considered the original Workplace Relations Amendment (Work Choices) Bill 2005 in October-November 2005 and considers that the broader provisions of the bill were sufficiently discussed then. The focus of today’s hearing will be the proposed amendments regarding the stronger safety net provisions and the additional fairness test that will guarantee entitlements such as penalty rates are not traded off without adequate compensation. We will also hear evidence on the proposed amendments to return and protect conditions related to public holidays, meal breaks, penalty rates, overtime and redundancy benefits.

Before the committee starts taking evidence, I advise that all witnesses appearing before the committee are protected by parliamentary privilege with respect to their evidence. Any act by any person that operates to the disadvantage of a witness on account of evidence given by that witness before this committee is treated as a breach of privilege. Witnesses may request that part or all of their evidence be heard in private. I also remind witnesses that giving false or misleading evidence to the committee may constitute a contempt of the Senate. We commence proceedings with the Department of Employment and Workplace Relations. Thank you for your submission. Are there any changes or additions to that which you would like to make?

Mr Pratt —No.

CHAIR —I invite you to make an opening statement, after which committee members will ask questions.

Mr Pratt —Given the time constraints of the committee, we thought we might spare you an opening statement today. Our submission is reasonably straightforward. However there was one matter I thought I might just mention briefly. Given that the department is on first today, and we understand that the reason for that is to accommodate interstate participants—typically we would come on late in the piece, which would give us an opportunity to assist the committee with any errors of fact or misinterpretation of the bill—if it would assist the committee, we would be prepared to provide a very brief supplementary submission, say, on Tuesday next week on any issues that we observe during the course of the day where there are any misinterpretations or inaccuracies. Would that be helpful?

CHAIR —Yes, that would be most helpful. I do appreciate you giving some thought to that. We will take it as a given that you will do that.

Mr Pratt —I have nothing further to say.

CHAIR —I will ask you to briefly run through the technical provisions of the act that make the amendments. We all have copies of the act, but I would like to have this on the record.

Ms James —I will focus on the key provisions. The key provision that determines whether the fairness test will be applied is section 346E. This is a gateway provision, if you like. It sets out the key criterion. You can see there, as per the Prime Minister’s statement, that it talks about agreements being lodged on or after 7 May and the salary cap of $75,000 for AWAs. It makes it clear that all collective agreements are subject to the fairness test. Section 346F makes it clear that a variation to an agreement that was made prior to 7 May will bring that agreement forward to be subject to the fairness test. The other key aspect of the application of the fairness test is that the work the employee is doing is work which would usually be regulated by an award. Where there is no actual award that would apply there is a mechanism to designate an award and that is set out in sections 346K and 346L.

The key provision that sets out the fairness test itself is 346M. There has been a lot of discussion about the components of the fairness test so I will not take you through all of it, except to say that at its core the requirement is that fair compensation is to be provided in lieu of any protected award conditions that are not included in the agreement itself. If any protected award conditions are excluded or modified, there must be fair compensation for that.

The provision then goes through and sets out some things that the director may have regard to. Primacy is given to monetary and non-monetary compensation. Non-monetary compensation is defined as something which can have a money value assigned to it and which confers a benefit or advantage on the employee and which is of significant value to the employee.

I would like to point out that this is no different from the no disadvantage test. In fact, if anything it is slightly stricter than the no disadvantage test because the non-monetary compensation definition puts some requirements in there about value to the employee. Many of the submissions have pointed out that this could be subjective, as if this were a criticism. We actually consider this to be a major strength of this test, particularly with individual agreement making. What it enables is the particular value that an employee might put on a thing to be taken into account in a way that, arguably, the no disadvantage test may not have permitted.

Other things that the director may have regard to include the personal circumstances of the employee, and there are a number of examples in the explanatory memorandum that set out how we intend this to work. Those examples focus on situations where an employee might prefer to work different hours from standard hours, although they are full-time employees; and, where ordinarily some of those different hours might attract penalty rates, the test enables the employee to be treated as a normal full-time employee when they are making up those hours. So the examples in the EM go to things like a person wanting to pick the children up from school after 3 pm, so they leave early each day and make up the time on a Saturday or a Sunday, when there are alternative childcare arrangements for their children.

This is very much focused on personal preference. It is subjective. It is intended to be so. But it also must still be compensation: it must be favourable to the employee. The idea that somehow the employer could say to an employee, ‘You must make up the time on the Saturday,’ is not what is envisaged by the fairness test and it is not what would be permitted.

The test talks about exceptional circumstances and public interest as well. Certain things can be taken into account then. This is a high threshold. As I said to the Senate budget estimates committee when we discussed this, this is a higher threshold than under the old no disadvantage test. To take into account the industry location or economic circumstances of the employer, for example, not only must it be not contrary to the public interest for that agreement to be in operation; it must also be demonstrated that there are exceptional circumstances to justify it. That was not a requirement under the no disadvantage test.

The provisions then set out a range of processes for assessing what happens when the test fails—a reconsideration period, a 14-day period for the parties to take the advice of the Workplace Authority director and fix the agreement, if you like. Then it sets out the consequences if the agreement is not fixed. The consequences are essentially designed to put the parties in the position that they would have been in if the agreement had never been made, and they require compensation to be paid if the employee was effectively worse off for that period in terms of their take-home pay.

CHAIR —Good. Thank you for that, Ms James. Senators will realise we have one hour for the discussion with the department, and I propose to allow a fair allocation of time between the parties as far as asking questions. Senator Marshall, we will start with you.

Senator MARSHALL —Thank you. Ms James, when you say there is no difference to the old no disadvantage test, you are actually saying that in the context of how it is being applied against the protected award conditions, because the old no disadvantage test applied against the whole award, didn’t it?

Ms James —When I was making that reference to the no disadvantage test, I was specifically referring to the nature of things that could be compensation. The fairness test applies against the safety net in the new system, and that safety net takes into account the Australian fair pay and conditions standard, which is not tradeable, unlike pre the amendments to Work Choices, where conditions like annual leave and minimum rates of pay could be traded off—and the protected award conditions.

Senator MARSHALL —But it is quite different in its application, isn’t it? It has been put to me that it is the same as the old no disadvantage test, but that is not actually what you are saying—it is quite different.

Ms James —It is operating in a very different context, I would say.

Senator MARSHALL —The way it is applying is saying in terms of measuring the no disadvantage test that it only applies to the protected award conditions and not the overall award conditions, so it is a much narrower focus.

Ms James —The test is applied against the safety net that I just outlined.

Senator MARSHALL —Yes, so it is a much narrower focus than the old no disadvantage test, isn’t it?

Ms James —I would not say that it is a narrower focus, no. I would say that it prioritises the key conditions identified in the safety net.

Senator MARSHALL —Didn’t the old no disadvantage test apply to the whole of the award, though?

Ms James —That is correct.

Senator MARSHALL —This does not. So it is a much narrower focus, isn’t it?

Mr Kovacic —The point that Ms James made, Senator, is that there were components of the award safety net that were previously tradeable which are no longer tradeable.

Senator MARSHALL —I understand that point. I am just trying to make the clear distinction that it is not the old no disadvantage test in its entirety being applied; you are applying it in a similar way, but only to a limited extent of conditions which are now the so-called protected award conditions.

Ms James —It is a different context that we are operating in now. The legislative entitlements that cannot be traded away in the standard also impact on the way that the test works.

Senator MARSHALL —You say that the subjective nature of the fairness test is a strength. What guidance is given for this subjective test? I do not see—maybe you could point me to this—any definitions of ‘exceptional circumstances’, ‘fair compensation’ or what is ‘significant value’.

Mr Kovacic —One of the intentions is for the Workplace Authority to develop policy guidelines which will assist its officers in applying the fairness test. By way of background, I would like to actually table a copy of the AWA policy guide which the former Office of the Employment Advocate used for the purposes of applying the no disadvantage test. I ask the senators to bear in mind that it is, as Ms James said a moment ago, a slightly different context that it is applying in. But, nonetheless, it actually deals with some of those issues in terms of, for instance, how issues of non-monetary compensation might be dealt with.

Similarly, in terms of some of the flexibilities around hours of work, how they are dealt with and how they should be assessed, one of the points that is made in the policy guide is that it really is at the employee’s initiation that those flexible hours or family-friendly arrangements are initiated. The advice that we have had from the Workplace Authority is that they are looking to develop a similar policy guide. As with its former policy guide, that policy guide will be a public document. It will be a document that clearly will evolve over time as issues emerge in terms of agreement making. It is one that I think has previously been made available in an estimates context to this particular committee as well. So it will provide the operational guidance that your question goes to.

Senator MARSHALL —But what standing will that have under the act? I understand that there is an internal process, but are you saying that the whole process will be transparent and public?

Mr Kovacic —Certainly in terms of the policy guidelines, the intention is that that document, as was previously the case, will be a public document.

Senator MARSHALL —No, that is not my question. Will the process of applying a policy document be a transparent and public process?

Mr Kovacic —Certainly, the act envisages that the authority will have the capacity, where the director is not satisfied, to seek further information from the employer and employee or employees potentially to assist the director to satisfy himself that the agreement meets the fairness test. At the end of the day, if the director is not satisfied that the agreement meets the fairness test, he is obliged to advise that it fails the fairness test.

Senator MARSHALL —That is the subjective nature of it. I am asking about the process itself. Will it be transparent? Against the policy document that you talk about, will people be able to pick up and determine whether their agreement has actually been ticked off against those elements of the policy.

Mr Kovacic —Certainly there will be a very clear understanding of how the process will operate. There will be various stages where the Workplace Authority will communicate with the employer and the employee and that will provide an opportunity for the parties to agreements to seek further advice. One of the other elements of this scheme is the capacity for both employers and employees to request a prelodgement assessment so that there can be a degree of certainty, before they make an agreement, that it will comply with the fairness test. So I would argue that there would be a fair degree of openness, if I could put it that way, in the process and the way that the test will be conducted by the authority.

Senator MARSHALL —Ms James said the subjective nature of it is actually its strength and you are saying that it will be worked out against the policy document. I am trying to work out where the subjective overlaps with checking against the set of criteria in the policy document and how that will be evaluated.

Ms James —The subjective nature of the test comes from that ability to take into account, if you like, all the circumstances of a particular case, a particular employee’s situation and a particular employer’s situation as well. The provisions of the bill set out what actually amounts to compensation fairly clearly. It has to be fair compensation. It has to be something that confers a benefit on the employee and, of course, that is subjective in that different people might place different values on different entitlements. But the guidelines will set out the ways in which particular types of entitlements might be dealt with, considered and valued when it comes to something that can be given a monetary value.

In terms of the question about transparency or consistency in decision making, the requirement is that the Workplace Authority director must be satisfied that fair compensation has been provided in order to find that an agreement passes the test. To do that they have to have sufficient material on which to make an assessment. That is what the precedent around the idea of being satisfied says. They have a very broad but not prescriptive set of abilities to pursue that information. So we have not purported to set out a prescriptive number of steps to deal with every possible contingency of how the director will pursue information, in what circumstances they will check and double-check and how they will consider every possible agreement out there. That would be bureaucratic, it would be onerous and it would not be conducive to being able to make agreements quickly and in a streamlined manner. What we have done is to ensure that there is a high threshold of being satisfied that fair compensation has been provided while maintaining the flexibility of the director to be able to take into account all the circumstances of the case.

CHAIR —Before we go on, is it the wish of the committee that the AWA policy guide be tabled? There being no objection, it is so ordered.

Mr Pratt —It is very important when considering these issues to remember the starting point. Here it is that an employer and an employee have actually agreed on something and presented that to the Workplace Authority. That is the context we are talking about, there is actually an agreement.

Senator MARSHALL —The very existence of this legislation before us puts a lie to that assumption, doesn’t it?

Mr Pratt —No, Senator.

Senator MARSHALL —If employers and employees had agreed willingly to all these things being removed from the agreements in the first place, which has got us to this point, we would not have this legislation before us.

Mr Pratt —The point is that this substantially strengthens the safety net underpinning the workplace relations arrangements.

Senator MARSHALL —That is what we are trying to determine, whether or not it does for the purpose of this inquiry. So let’s keep to the questions and answers rather than the rhetoric.

Senator BARNETT —I take exception to Senator Marshall’s accusations. I find he is speaking out of order.

Senator MARSHALL —Is there any requirement for the Workplace Authority director to publicise the reasons for their subjective decision?

CHAIR —This is the last question, Senator Marshall, then I will move to Senator Fielding and I will then allow you or Senator Campbell another 10 minutes later.

Senator MARSHALL —How long have we been going?

CHAIR —Over 10 minutes. You have been going for—

Senator MARSHALL —I think the timing also has to be about how responsive the answers are to the questions.

CHAIR —That is agreed, but for the moment this is your last question before we move to Senator Fielding.

Senator MARSHALL —It is a question that goes broadly then to the need, because what you have told me is that, while it is subjective and there are going to be policy documents, ultimately the decision is made by the Workplace Authority director. That is the case, isn’t it?

Ms James —As it was the case with the no disadvantage test and the Employment Advocate test.

Senator MARSHALL —This is what wastes my time. It is an easy answer to the question. That is the case, isn’t it?

Ms James —I am happy for you to pose the questions and I will answer them.

Senator MARSHALL —All right, but I do not want my time being chewed up by the extra stuff. Ultimately isn’t it a decision for the Workplace Authority director?

Ms James —I think I have answered that question.

Senator MARSHALL —Well, is it yes?

Ms James —I said: yes, as it was with the Employment Advocate and the no disadvantage test.

Senator MARSHALL —Thank you for the extra words.

CHAIR —We will now move to Senator Fielding.

Senator MARSHALL —But this is part of a broader question.

CHAIR —I am sorry, Senator Marshall, but you will have to go on with that when the Labor Party turn comes around again. We are now moving to Senator Fielding.

Senator MARSHALL —Let us say I am unsatisfied with that.

CHAIR —It is on the record that you are unsatisfied. I call Senator Fielding.

Senator FIELDING —I have a couple of questions, and obviously I have to be fairly careful with the time. Do you remember this document: Work Choices: a new workplace relations system?

Mr Pratt —Yes.

Senator FIELDING —It has the example of Billy. Billy was offered an AWA that explicitly removed award conditions for public holidays, rest breaks, bonuses, annual leave loadings, allowances, penalty rates and shift and overtime loadings. Under this new fairness test, would that AWA be classified as being fair?

Mr Pratt —Only in the most exceptional circumstances. In fact, I cannot think of circumstances where that would apply, but I am not ruling it out.

Senator FIELDING —So you are not ruling that out under the new fairness test?

Mr Pratt —Only in the most exceptional circumstances, but I have not yet seen a hypothetical which would fit that bill—no pun intended there.

Senator FIELDING —So could you give us some understanding of what exceptional circumstances there would be? I would think most Australians would find it pretty amazing that under this new fairness test Billy and his offered AWA would be considered fair.

Ms James —Perhaps the best way to answer that question is to say that those facts on their own would not be sufficient to meet both the public interest and the exceptional circumstances requirement. The explanatory memorandum sets out some examples of potential exceptional circumstances. One of them is an example of a business that is struggling to keep afloat and a situation where an existing—

Senator FIELDING —Because time is short—and I will step in here—would you take that example. It is hypothetical but you have to answer it because it is in a document that was put out, I assume, by the department. There is nothing about ‘exceptional circumstances’ there, so we are going to assume that there are no exceptional circumstances. I could waste some of the committee’s time by reading it out.

Mr Pratt —In that situation, if there are no exceptional circumstances, Billy cannot occur.

Senator FIELDING —Okay.

Senator SIEWERT —What was that—sorry?

Mr Pratt —My answer was that, if there are no exceptional circumstances, the Billy case from the earlier Work Choices document cannot occur under this bill.

Senator FIELDING —Thank you for that. Have you had a look at all through the submissions that have been submitted?

Mr Pratt —Yes.

Senator FIELDING —I refer to the submission by the Shop, Distributive and Allied Employees Association. I would like to get your views on the example on page 12, in which a new AWA offered to new employees reduces the cash component of the wage by $50 a week but includes a $100-a-week shopping voucher to be used at the employer’s supermarkets. Would that case pass the fairness test?

Ms James —I do not believe that would meet the requirements of non-monetary compensation. In fact, as a rule, I think it would be doubtful that it would have met the similar requirements for the no-disadvantage test, because that kind of thing is arguably not a benefit; it requires an outlay by the employee. The definition of ‘non-monetary compensation’ in the bill strengthens this, because it talks about the requirement that the compensation be of significant value to the employee. Where a financial outlay is required and you have to spend it with the employer, I do not think that would meet the non-monetary compensation test. I also note that that was the position the Employment Advocate took under the no-disadvantage test.

Senator MARSHALL —So you can rule that out, can you?

Ms James —Yes.

CHAIR —Senator Marshall, you can ask those questions when it is your turn. Senator Fielding.

Senator FIELDING —I think some of the interjections are quite helpful, actually.

CHAIR —I will make the decision on that if you do not mind. You have some four minutes left.

Senator FIELDING —Thank you for reminding me of the time. So, Ms James, you can rule that one out. With regard to the fairness test being applied back to an award, how many employees in Australia are not covered by awards?

Mr Kovacic —The most recent data on that goes back to about May 2000, so it is somewhat out of date. But at that stage the estimate was that around 956,000 non-farm employees were award free.

Senator FIELDING —Is there an award for the information technology sector?

Mr Kovacic —It is a sector where there is some award coverage, but it is not universal.

Senator FIELDING —The reason is that most awards were done way before the IT industry was formed. Is that correct?

Mr Kovacic —I think that is probably right. I think it is also a reflection of the fact that the industry itself has not seen a need for award coverage to be established—and nor have the employees in the industry.

Senator FIELDING —There is a common thread in the submissions about who is covered by what award and about employers being confused about which award is in place, whether there is an award and whether the fairness test applies. After reading the submissions, I am left thinking that this is going to cause a fair bit of confusion about how the fairness test applies to people who are not on an award.

Mr Kovacic —For people previously covered by federal awards, it is quite clear in the sense that federal awards were respondency based. So there is a very clear basis for coverage there. For employers and employees formally in the state system, they have come into the federal system on notional agreements preserving state awards, and generally there will be some clarity there. In respect of areas where employees may have been established as new businesses post 27 March last year or, alternatively, have never had award coverage, as Ms James mentioned before, there is the capacity for the Workplace Authority to designate an appropriate award, which would be used as the basis of the fairness test. There is the capacity for employers and employees to seek, as part of the pre-lodgement process, advice from the authority as to what award might be designated.

Senator FIELDING —But isn’t one of the conditions for the fairness test being applied that an award is breached? If there is no award, how does that work? I do not understand. It is like the chicken and the egg.

Mr Kovacic —If it meets the $75,000 threshold in respect of an AWA, or in respect of both a collective agreement and an AWA, if the employee is working in an industry that is traditionally covered by awards, in the circumstances where the employer may not have responded to an award there is the capacity for the authority to designate an appropriate award. In essence it extends to businesses and employees working in areas where award coverage exists access to protected award conditions that up until now they may not have had. It is a widening of access to protected award conditions and in that regard it again is another dimension of the strengthening of the safety net for employees.

Senator BARNETT —I want to get some clarity on the fairness test in comparison to the no disadvantage test. I notice in your submission on page 9 it says:

The fairness test provides a stronger safety net because it builds on the minimum entitlements ...

So it is not the same but stronger. Is that right?

Mr Pratt —That is correct.

Senator BARNETT —Have you looked at the Australian Mines and Metals Association submission?

Mr Pratt —We have seen it.

Senator BARNETT —I draw your attention to pages 8 and 9 of that submission where it mentions AWAs in the mining and resource sector. It says:

As at 30 March 2007 37.2% of the resource sector were covered by AWAs.

Then it says:

A review of resource sector agreements lodged in the 12 months to 31 May 2007 reveals that 73.5% of resource sector employees were covered by an AWA, 21.8% are covered by a union collective agreement and 4.5% are covered by a non-union collective agreement.

Can you either confirm now or take on notice the veracity of those figures? There has been some debate politically and in the public arena with respect to AWAs and their penetration of the total employment market. Could you advise the committee as to the industry-by-industry breakdown of the number of employees covered by AWAs. We had some advice from the Employment Advocate last week in budget estimates about the numbers of AWAs by industry and by state, so I was wondering if you could also take on notice to provide the latest figures for AWAs that are current on a state-by-state basis and on an industry-by-industry basis.

Mr Kovacic —We should be able to get that information very quickly downloaded from the OEA website. The information would be as at the end of the March quarter, which is the most recent publicly available information.

Senator BARNETT —I have two other questions. We have two options—we are going to have either AWAs or possibly no AWAs, where common-law contracts are the case in point. The AMMA submission on pages 9 and 10 says that:

The shortcomings associated with a common law contract of employment, as opposed to an AWA, are that ...

It lists 15 things and then sums up:

The use of common law contracts is a legal mine field.

What provides a safer legal arrangement for workers—the safety net arrangements that are proposed in this legislation or common-law contracts?

Mr Pratt —That is a slightly difficult question to answer directly. Clearly, common-law contracts are subject to the award and the standard. AWAs, as proposed by this bill, will be subject to a fairness test where the new Workplace Authority will consider the terms of the AWA against both the standard and the protected award conditions as set out by the award. It is possible to say that there is greater scrutiny of an AWA, but it is important to understand that common-law contracts are also subject to the standard and the various award provisions.

Senator BARNETT —We have seen in recent times on the public record that purportedly honest mistakes have been made. Are workers safer under the government’s legislation in terms of their entitlements and terms and conditions of employment or are they safer under common-law contracts?

Ms James —As I said to Senator Marshall, I will answer the question not exactly in the terms you have asked it. I would avoid the terminology ‘safer’. The point I would make is that AWAs and collective agreements are enforceable under the Workplace Relations Act. There are penalties for breaching them. The Workplace Ombudsman will be able to take that action on behalf of an employee. These are all aspects that are not available for the enforcement of common-law contracts, which require court action by the employee. The other point is that AWAs and collective agreements must be in writing and AWAs in particular must be signed by both parties. This makes it clear what the terms and conditions of employment are. Often common-law contracts are not in writing, making enforcement very difficult.

Senator BARNETT —The bottom line is that under common-law contracts the employee has to take it upon themselves to follow through, follow up and litigate, if required. Is that correct?

Ms James —That is correct.

Senator BARNETT —AiG made a recommendation in its submission that section 355 be repealed and they made other suggestions regarding amendments. That was a late submission—a letter dated 7 June, which I received last night. I wonder whether you have had a chance to look at that. If you have not, perhaps you could give us your thoughts on that.

Ms James —Rather than addressing the specifics of what AiG have raised, perhaps I will talk about the intention of section 355. Section 355 puts some limitations on the calling up or incorporating of other instruments into agreements. One of the things very common in the old system was that agreements would call up or incorporate the terms of or refer to old awards—sometimes very old awards, sometimes multiple previously applying instruments, agreements and awards. They would call them all up and then provide rules for stepping through the inconsistencies between all those documents. It was incredibly difficult in these circumstances, firstly, to ascertain what the terms and conditions might be and, secondly, you had to wonder whether the employees who were approving the agreements really understood the lengthy documents sitting underneath the agreement itself. Section 355 is designed to permit a degree of incorporation but put rules around it and, effectively, make sure that the terms and conditions that apply to the employee are in the agreement itself. The government considers that that is a better approach than what existed before where potentially you had a lot of ambiguity where calling up was going on. The government’s position is still that this is an enhancement for agreement making. It provides more certainty to all parties.

Senator SIEWERT —I understand the authority will have significantly more staff under this new process. How many AWAs are you expecting to deal with? How much time do you expect each AWA will take to assess?

Mr Kovacic —The expectation is that in the next financial year around the same number of AWAs as have been lodged this financial year will be lodged with the Workplace Authority—around 400,000. The data we have estimates that about 90 per cent of non-managerial employees earn less than $75,000 per annum.  Concerning the time frame within which the authority is likely to assess agreements, the advice we have is that in circumstances where the information is provided and a prelodgement assessment has been undertaken it should take seven to 10 working days. For more complex cases it is likely to be more than 10 working days.

Senator SIEWERT —How long will a prelodgement assessment take?

Mr Kovacic —Again, the same sort of time frame should apply. It really depends on the quality of the information provided by the employer or employee in a particular instance and the number of occasions on which the authority may have to go back for further information.

Senator SIEWERT —So the seven to 10 working days is for a complete review including the prelodgement?

Mr Kovacic —No, they would be separate processes.

Senator SIEWERT —That is what I thought you meant. I did not quite understand the answer you gave just then in terms of how long it will take to review a prelodgement, because surely that will add onto the 10 days.

Mr Pratt —It is important to add, of course, that if the prelodgement process has been undertaken then that would speed up enormously the approval of a final agreement being put to the authority.

Senator SIEWERT —That is why I asked the question: how long will a prelodgement assessment take? And then I asked: does that seven to 10 days include that?

Mr Kovacic —Sorry, Senator, I thought what you asked was how long the assessment is likely to take. The second question was then how long the prelodgement assessment would take.

Senator SIEWERT —You said it would be quicker if a prelodgement assessment had been done.

Mr Kovacic —That is correct.

Senator SIEWERT —Then you said it would take seven to 10 days. I was assuming that that excluded the prelodgement assessment.

Mr Kovacic —That is correct. The prelodgement assessment will be a separate process which will occur in advance of an agreement being made and lodged.

Senator SIEWERT —And how long will that take?

Mr Kovacic —Ideally it will be, again, in the order of seven to 10 days, but it really depends, as I said, on the quality of the information that an employer or an employee provides to the authority and the complexity of the case. You cannot be prescriptive about what it might be. Clearly the authority is keen to ensure that prelodgement assessments are undertaken as expeditiously as possible, but it really depends on the quality of information and the complexity of the matters involved.

Senator SIEWERT —I do not want to spend too much time on this because I do not have a lot of time. So it takes seven to 10 days for a prelodgement assessment. How long does it take after that once you get the final AWA?

Mr Kovacic —The seven to 10 days will be in circumstances where an agreement is also lodged, all of the information is provided and it has also been through the prelodgement. It is likely to be in that order.

Senator SIEWERT —So all up you are talking about 14 days.

Mr Kovacic —If you see them as two separate processes—and there might be a gap of whatever between the prelodgement assessment process and when an agreement is actually made and lodged—then each one is likely to be in the order of seven to 10 days depending on the quality of the information and the complexity of the matter.

Senator SIEWERT —How many new staff do you have?

Mr Kovacic —In 2007-08 there are an additional 231 staff for the authority.

Mr Pratt —Just to clarify, that is on top of several hundred staff who have been transferred from the department to the Workplace Authority and the Workplace Authority’s existing staffing.

Senator SIEWERT —So how many are there all up?

Mr Kovacic —There will be between 750 and 800 staff all up.

Senator SIEWERT —As I understand it, the exceptional circumstances that can be taken into account when we are talking about the employer can include the employer’s financial constraints. Is that correct?

Ms James —Like the no disadvantage test, it is one of the focuses of this component, if you like. The example that is given in the act itself is where there is a short-term crisis that the business is dealing with and, in order to keep the business afloat for a period of time, an agreement that would not otherwise pass the fairness test is allowed to operate. In the previous system one good example of this was an example involving Greyhound.

Senator SIEWERT —I do not actually care about the previous system; I care about this system.

Ms James —I just think that this example is exactly the kind of thing that we are aiming at. The example of the short-term crisis is the same as the old NDT. The key difference between the two is that, by requiring that there be exceptional circumstances as well as requiring that the agreement not be contrary to the public interest, the barrier has actually been raised.

In the Greyhound case, the company was technically insolvent. It had a $9 million deficiency between its assets and liabilities, and the commission noted that certifying the agreement, although there was some loss of certain conditions, allowed the company to secure additional loan funds for ongoing operations. It prevented the company being placed in receivership. It enabled more predictable labour costs for the company, effectively giving the company a chance to stay afloat and maintain the jobs of those people. I think in that case, and in other cases, they also noted that there was unanimous agreement by the employees.

So these are the kinds of circumstances we are talking about when we talk about exceptional circumstances, short-term crises and taking into account the situation of the business. We are not talking about a situation where a business would like to make more money and would therefore like to cut terms and conditions. We are talking about a situation where there are genuinely exceptional circumstances and it is therefore justified to keep a business afloat to have, for a short period of time, an agreement that would not otherwise have satisfied all the requirements of the fairness test.

Senator SIEWERT —Are those AWAs signed for the same length of time?

Ms James —They could be. One of the things that the commission used to take into account was the duration of the agreement.

Senator SIEWERT —No, now.

Ms James —So now it could be a five-year agreement but, following the case law of the commission when they were considering the public interest requirement in the old system, I think the Workplace Authority Director would take into account duration. There were cases in the old system where the commission would say, ‘You can’t have it for three years; you can only have it for one year because that’s what is justified.’ This comes back to the concept of fair compensation and that the deal must be fair in the circumstances. So the authority director would take into account the duration of the agreement when deciding whether or not it was fair to allow it to operate.

Mr Kovacic —Can I just add briefly to one question that I answered before. I should emphasise that where a prelodgement assessment is undertaken, whilst the agreement is ultimately lodged, assessment will be fast-tracked, so it might indeed come down to less than seven or 10 working days in those circumstances. That, together with the certainty that prelodgement provides, is a very powerful incentive for employers and employees to actually use the prelodgement process.

Senator MARSHALL —I will follow up. That is probably where I was leading to. I guess the difference is that the commission’s decisions, which you referred to, in the past were actually public decisions that were published and were transparent. Are the decisions now in these circumstances going to be made public?

Ms James —The Workplace Authority is not a tribunal that is going to hold hearings, take submissions and get bogged down in the procedural processes.

Senator MARSHALL —Please, Ms James, just answer the question. I do not need all that because I can read that.

Ms James —And so, because of that, the approach is different. There is no official issuing of reasons, as was the case before, under the NDT.

Mr Pratt —Senator, I do not want to take up extra time—I realise time is short—but it is not possible to answer the questions with yes/no answers often, given the complexity of the subject.

Senator MARSHALL —Well, you really just have. The reality is that it is not going to be open and transparent, is it? There is no need to publish the reasons.

Senator BARNETT —That’s your interpretation, Senator.

CHAIR —Order!

Ms James —I would not say that it is not open and transparent. The legislation sets out the requirements.

Senator MARSHALL —Yes, but it is subjective.

Ms James —The director has to provide advice—

Senator MARSHALL —You have told us that it is a subjective outcome. There is no reason to justify reasons for the decisions, is there?

Ms James —I have not said it is a subjective outcome, and perhaps this is why I prefer to answer the questions according to—

Senator MARSHALL —There is nothing in the act which requires the reasons for a decision to be made public.

Ms James —Formal reasons about the result of the fairness test application are not going to be issued—that is correct.

Senator MARSHALL —So, based on all the things that the workplace director can take into consideration when this person comes to make this decision, including exceptional circumstances, none of which has to be revealed, is there anything in the legislation—and this also goes to what Senator Fielding asked—to stop an agreement being declared fair that consists of only the minimum wage and the minimum fair pay and conditions standards?

Ms James —Without exceptional circumstances—and you have not given me any there—the answer to that is that that agreement would not pass the fairness test.

Senator MARSHALL —No, but that was not the question. The question was about the Workplace Authority director making this decision: is there anything in the legislation that would stop him, after he has gone through whatever processes he will that will not be published, approving or declaring fair an agreement that only contains the minimum wage and the fair pay and conditions standard?

Ms James —Yes. What would prevent that from happening is the requirement that the Workplace Authority director is satisfied that fair compensation has been provided, and, based on what you have just articulated, I cannot imagine that that would be considered fair compensation. It simply would not be.

Senator MARSHALL —Well, point me to the bit in the bill which prevents an agreement being declared fair by the Workplace Authority director that contains only the minimum wage and the fair pay and conditions standard.

Ms James —As I said before, Senator, the bill does not purport or attempt to set out every possible agreement out there and every possible result or outcome. The provision that would prevent that from happening is the core provision of the fairness test itself which requires that the Workplace Authority director be satisfied that fair compensation has been provided. In that situation you have just described—

Senator MARSHALL —Or exceptional circumstances.

Ms James —In that situation you have just described, no compensation has been provided whatsoever, and I cannot imagine that that would pass the test in any circumstance.

Senator MARSHALL —No—can’t imagine! I had better hand over to Senator George Campbell.

CHAIR —Senator Campbell.

Senator GEORGE CAMPBELL —Mr Pratt, the workplace director, as he is now called, told us at budget estimates that something like 20,000 agreements had been lodged from 7 May, none of which have yet been assessed because he did not have staff to do the assessments. I am told independently that there could be something like 80,000 to 100,000 agreements in the backlog that will have to be assessed. As I understand it, once these agreements are lodged, the conditions that are in them apply. If, in the process of the assessment being carried out over the next few months or whatever time it takes, some or any of those agreements are found to be deficient in any respect and the workplace director requires them to be corrected—which I understand he can order—is there provision for the new arrangements to be backdated to the time of lodgement?

Mr Pratt —Yes, Senator.

Senator GEORGE CAMPBELL —There is. Where is that specific provision in the bill?

Mr Bohn —Senator, the way the bill is set up is that, for agreements lodged after 7 May, the rules in the bill apply, including the rules that provide for payment of compensation and what people fall back to if the agreement ultimately fails the test. So those rules apply to all agreements that are lodged after 7 May.

Senator GEORGE CAMPBELL —So the payment of compensation is also taken to include retrospective payment?

Mr Bohn —It includes all payment from the time the agreement was lodged, if it was lodged after 7 May, until the time when the agreement is found to fail the test.

Senator GEORGE CAMPBELL —Does that include retrospective payment?

Mr Bohn —I am not sure I understand the question. It is all—

Mr Kovacic —If the agreement was lodged on 7 May, any compensation that was payable would be backdated—

Senator GEORGE CAMPBELL —Would be backdated to 7 May.

Mr Kovacic —to 7 May, yes.

Mr Bohn —To the date of lodgement; that is right.

Senator GEORGE CAMPBELL —But it does not specifically provide for retrospective payment in the bill, so is it possible for the workplace director to order compensation from the point at which he determines that there is a deficiency?

Mr Bohn —No, Senator.

Senator GEORGE CAMPBELL —It’s not?

Mr Bohn —The legislation provides that compensation is payable in respect of the period from lodgement until failure—the whole period.

Senator GEORGE CAMPBELL —Where is that in the bill, Mr Bohn?

Mr Bohn —It is in proposed section 346ZD, on page 27 of the version of the bill that I have.

Ms James —And, Senator, it is not a matter of anyone making an order. It just is; this is the effect of the bill. There is no discretion around this. The compensation becomes payable; the employer must pay it. If the employer does not pay it, it is enforceable under the act in the same way an award breach is enforceable, and the workplace ombudsman will take action to recover those moneys if they are not paid.

Senator GEORGE CAMPBELL —I will go back and look at the bill.

Mr Bohn —If I could assist by pointing out that section 346ZD, subsection (4), defines the fairness test period—which is the period in respect of which compensation is payable—as the period beginning on the day on which the agreement is lodged and ending on the day on which the agreement ceases to operate, which is the day on which the notice of failure is issued.

Senator GEORGE CAMPBELL —But the point I am concerned about is that I do not think the bill specifically provides that compensation must cover the whole period.

Mr Bohn —It does. That is what that provision does. In respect of any shortfall in that period, that is recoverable.

Senator FIELDING —Just a point of clarification: what is the potential time difference between starting a job under an AWA, for example, and the lodgement date? How big can that gap be? Can you explain that? I know it goes back to the lodgement date. How big can the gap be between starting employment, being paid and the agreement being lodged?

Ms James —It is open for an employer and an employee to make and lodge an agreement before the employment starts—

Senator FIELDING —I understand ‘before’.

Ms James —but, under the obligations of the act, you must lodge an agreement within 14 days of having made it.

Senator FIELDING —So, if the person is working for 14 days, the compensation goes back to the date of lodgement, not back to the time they started their job?

Ms James —That is right, but the conditions in the AWA do not commence until lodgement. So for that 14 days beforehand they would have been covered by something else. They would not have been covered by that AWA.

Senator FIELDING —It is a brand new job, so they are not covered by—

Mr Pratt —They will be covered by other applicable instruments in the workplace, presumably the award.

Senator FIELDING —We went through this before. There is no award.

Mr Pratt —Unless it is an industry where awards do not apply.

Senator FIELDING —What happens in that case?

Mr Pratt —Then they are covered by the standard.

Senator FIELDING —The five minimum—

Senator GEORGE CAMPBELL —Ms James, in respect of the example in the SDA submission, you said to Senator Fielding that the voucher would not be regarded as significant non-monetary compensation. What is regarded as significant non-monetary compensation? Can you give us some examples of what are included in that category?

Ms James —I can first take you to the definition in the bill of ‘non-monetary compensation’:

(a)           for which there is a money value equivalent or to which a money value can reasonably be assigned; and

(b)           that confers a benefit or advantage on the employee which is of significant value to the employee.

The explanatory memorandum sets out some examples, such as child care, car parking et cetera.

Senator GEORGE CAMPBELL —Let’s take the example of car parking. If I work in the CBD of Sydney, it may be a significant advantage to me to be provided with a car space, given the shortage of spaces in the CBD. But if I worked out at Penrith it may not be significant—

Ms James —Absolutely.

Senator GEORGE CAMPBELL —You are saying to me that, in every one of these examples, a workplace director or one of his staff will have to go through and look at each individual circumstance?

Mr Kovacic —Can I just refer you to page 76 of the OEA policy guide, which deals particularly with car parking. It says: ‘The value of free car parking facilities for employees may vary according to the location. It is more valuable in the CBD of a major city than in a rural town.’ That is the way—

Senator GEORGE CAMPBELL —I understand what is there. The point that I am trying to get to and trying to understand is that you are not seriously suggesting to this committee that you will deal with 400,000 AWAs and that you will have staff to sit down and look at where a car park is provided in the CBD and is of significant value or where it is provided at Penrith and is not of significant value and also look at what the other non-monetary payments are?

Mr Kovacic —In terms of the process and the information that is provided to the authority, the intention at this stage is for the employee information statement to include a section where the employee can actually provide details as to whether a particular non-monetary item is of significant value to them. In those circumstances, there is also the capacity for the authority to seek further advice and information from the employee to enable the authority to assess whether the particular item is of significant value to them.

Senator GEORGE CAMPBELL —That is my third point. In respect of the provisions of exceptional circumstances, there is a provision in the bill where the director is actually authorised to examine the personal circumstances of employees. How does this stack up against the Privacy Act?

Ms James —I do not think that is at all relevant.

Senator GEORGE CAMPBELL —Why not?

Ms James —Because this is a situation where an employee and an employer have made an agreement that the personal circumstances be taken into account and so the employee wants this arrangement. If they want the agreement to be approved, they need to provide the necessary information to the authority director so that the circumstances are clear. It is a voluntary process. If they do not want their personal circumstances to be taken into account, if there is no advantage for them in that, then I do not imagine that they would be making agreements based upon them. The director will not have the ability to compel any information to be provided to them by any person. Any information that is provided is entirely voluntary and based on the desire of the parties to get an arrangement in place which suits their needs.

Senator GEORGE CAMPBELL —If that is the case why are the words used ‘the director is authorised’ to examine their personal circumstances?

Ms James —What the director is authorised to do is to ask for information if it is not clear that the fairness test has been passed. There is no ability to compel the provision of any information by anyone in this. That is because this is a voluntary system. People have volunteered to make an agreement. They have volunteered to have it scrutinised to ensure that it is fair.

Senator GEORGE CAMPBELL —If the director is concerned that it does not meet the fairness test and he ‘asks’ the employee for information and the employee says, ‘No, those are my personal circumstances; I’m not prepared to provide that,’ would they then assume that the fairness test is met?

Ms James —No, not at all. In that case it would be very clear that the director would not have been able to have been satisfied that the fairness test is passed because there would not be sufficient material for them to make that decision. In that event, the agreement would fail the fairness test.

Senator GEORGE CAMPBELL —So in those circumstances, the exceptional circumstances would fall over?

Ms James —To the extent that the personal circumstances are relied upon, the agreement would fall over.

Senator GEORGE CAMPBELL —That is the point I am trying to get at. If an employer and an employee seek to lodge a document that provides for exceptional circumstances and provides for less than fair compensation because there are exceptional circumstances then that can be nullified if the employee says, ‘I’m not prepared to provide the personal information’?

Ms James —Yes. I think that we need to distinguish here between the exceptional circumstances, which are primarily about the employer’s situation, and the personal circumstances, which are primarily about the employee’s. They are actually dealt with under different subsections. In both cases, the authority director must have sufficient material before him or her to enable them to be satisfied. In the event that there is not sufficient material, they will not find that that agreement has passed the fairness test.

CHAIR —Thank you. We will have to leave it there.

Senator GEORGE CAMPBELL —I have one final question in respect of that.

CHAIR —I am sorry, you cannot, Senator Campbell. We have run out of time for this section.

Senator GEORGE CAMPBELL —I am sorry, Madam Chair. There are some serious aspects of the bill that this committee is entitled to ask the department about. I must say it is outrageous that only one hour was allowed for the department to talk to us about the details of a bill that was introduced about a week ago and which we have not had the chance to examine. There are some serious consequences which the department have already indicated that they will be seeking amendments to.

CHAIR —They have agreed to follow up any further aspects of this bill by a further submission on Tuesday.

Senator GEORGE CAMPBELL —Can I ask you to follow up and tell us what the definition of ‘significant’ is taken to be. Is it the dictionary definition? Or does it have some other meaning in regard to its application under this act?

CHAIR —I think the department will provide a further answer to that in their written submission. Thank you very much for your appearance here today.

Mr Kovacic —To return to Senator Barnett’s question, I have some information in terms of the number of current AWAs broken down by state and industry sectors in proportional terms which I can table.

CHAIR —Thank you very much for that. The committee agrees it will be tabled. I might add, Senator Marshall, that the timetable for today was partly set on the representations of the ALP, so we will not have any argument about the times, thank you.

Senator GEORGE CAMPBELL —It certainly was not set with any consultations with me.

CHAIR —It was with your deputy chair.

[9.36 am]